Predicting Singapore's financial account balance to measure risk sentiment

To demonstrate its efficacy, we've charted our nowcast's historic performance against actual balance-of-payments statistics (which are reported only quarterly) as well as the high-frequency fund-flow data exclusively provided by our partners at EPFR.

Our nowcast expresses the financial account balance as a share of GDP. One of its inputs is the daily flow in and out of Singaporean stock and bond funds.

A positive reading is associated with accumulation of higher net assets (net fund outflow) while a negative reading implies higher net liabilities (net fund inflow)*.

Our nowcast strikes a balance between detecting early signals from these fund flows and avoiding distortions during times of more extreme volatility; other high-frequency indicators are chosen instead. (This was especially important during the pandemic.)

In our subsequent charts, we've also visualized the same nowcast for Singapore's ASEAN partners: Indonesia, Malaysia, the Philippines, Thailand and Vietnam. Their trends are broadly similar.

Lower or negative fund inflows (positive net FA as % of GDP) also tend to represent bearish investor sentiment for the wider region, and vice versa. We have marked several such inflection points on our chart -- including Donald Trump's first tariff announcements in 2018; the pandemic, and the peak of the global rate-tightening cycle. In the latter case, we can particularly see our nowcast signaling fund outflows.

Looking ahead, our Nowcast is suggesting that in the short term, Singapore (and its neighbors) should continue to see overall net inflows, despite trade disruptions from Trump's policies.

Click here for more visualizations of Singapore's financial account balance nowcasts.

*To conceptualize why a negative financial account reading is bullish (a net fund inflow), consider that money received from a foreign investor is converted into a financial instrument that is then considered a liability for the Singaporean economy. Funds flowing out of Singapore to buy an asset abroad push the balance in a positive direction.

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